Blues chief seeks lawmakers' support

January 25, 1995|By John Fairhall | John Fairhall,Sun Staff Writer

Appealing to the General Assembly for support, Blue Cross and Blue Shield of Maryland President William L. Jews told legislators yesterday the company's future is "threatened" if it can't make major changes that the state insurance commissioner rejected Monday.

But Mr. Jews did not ask the legislature to immediately intervene. Instead, both he and Insurance Commissioner Dwight K. Bartlett III held out hope of finding a legal way to let the state's largest health insurer achieve its goals.

"My impression is the commissioner will be receptive to talking to us," Mr. Jews told a reporter after a meeting with the House Economic Matters Committee. He said he had spoken to Mr. Bartlett after the commissioner had rejected the company's plan to reorganize and sell stock through a new for-profit subsidiary.

Mr. Bartlett said yesterday that he "would be willing to sit down with [Mr. Jews] and other interested parties . . . to discuss ways they could be given access to capital markets."

The commissioner said he told Mr. Jews that his rejection of the plan was not based on objections to the company's goals.

"My decision was not a public policy decision," he said in an interview. "It was a decision what the law would permit."

Mr. Bartlett ruled that the company's plan would transform nonprofit Blue Cross into a for-profit enterprise in violation of state law. He said that the company either could submit a new reorganization plan -- that keeps Blue Cross unquestionably nonprofit -- or ask permission to formally convert to a wholly for-profit business.

But Mr. Jews told legislators he doesn't want to convert Blue Cross to a for-profit company because it would give up its nonprofit obligation as an "insurer of last resort," selling policies to people regardless of their health.

He also said it would be hard to obtain the approval of two-thirds of Blue Cross' subscribers, as state law requires when a nonprofit converts to a for-profit.

Mr. Jews' meeting with the House committee overseeing insurance issues was intended to be a general briefing on the company's status. But Mr. Bartlett's decision dominated discussion, with Mr. Jews using the opportunity to seek the legislators' support for his goals and update them on his plans -- including what Mr. Jews termed an imminent agreement with GTE Data Services to provide computer services to Blue Cross.

Blue Cross urgently needs capital and more business flexibility, advantages for-profit insurers are using to take business from Blue Cross, according to Mr. Jews. He complained that the company is more heavily regulated than any other insurer and, in an interview, said he'd like the regulatory burden to be lightened.

"If we continue as we are currently from an operations standpoint, in the immediate future Blue Cross will be fine," he said. But Blue Cross "long-term viability . . . is threatened," he said.

Del. Hattie N. Harrison, a Baltimore Democrat, expressed interest in sponsoring legislation that would relieve Blue Cross of one obligation -- a requirement that it obtain the commissioner's approval for changes in fees paid to physicians. Mr. Bartlett has not ruled on a recent company request to slash fees of most specialists by as much as 25 percent.

Following the meeting, the committee chairman, Del. Michael E. Busch, a Democrat from Anne Arundel County, said he hoped Mr. Jews and Mr. Bartlett could work out a solution to the company's problems without requiring the legislature to act.

Several legislators praised Mr. Jews' performance as president and chief executive of Blue Cross, which he said was close to insolvent when he joined the company in April 1993. But Del. Elijah Cummings, a Baltimore Democrat, brought up a sore subject: salaries and other benefits given to Blue Cross executives.

Mr. Jews' predecessor, Carl J. Sardegna, came under fire when it was revealed he was receiving more than $800,000 at a time the company was losing money. Mr. Jews is paid about $600,000, which he said is $200,000 less than top executives receive at other insurers of the same size.

The rejected reorganization plan would have permitted Mr. Jews and other executives to receive stock options that could have enriched them if the for-profit subsidiary proved successful.

"I think it's unfortunate that we get hung up on stock options and the like," Mr. Jews told the legislators.

"Every executive in the world has an incentive plan. A stock option is no more than an incentive plan."